Reforming Canada’s pension system

Expanding the Canada Pension Plan (CPP) will help address the continuing decline of workplace pensions, said the national president of the Canadian Union of Public Employees.

“From our perspective, it’s the most efficient and broadest solution to this pan-Canadian challenge of lack of pension coverage,” explained Paul Moist, during a panel discussion at the first annual Pensions Conference in Toronto on Monday.

But not everyone agreed.

“One of the reasons why there is a huge degree of sensitivity about the prospect for increasing the CPP is that entrepreneurs pay double the rates of the CPP than other Canadians do for the same amount,” explained Dan Kelly, president and CEO of the Canadian Federation of Independent Businesses.

The self-employed must pay both the employer share and the employee share of contributions, or the full 9.9% of pensionable earnings ($4,712.40 in 2013).

He added that an across-the-board solution might not make sense for all middle-income Canadians, the group identified as the most at risk.

Instead of doubling the maximum pensionable earnings to more than $100,000—as Prince Edward Island Minister of Finance, Energy and Municipal Affairs Wesley Sheridan has suggested—Morneau proposed an increase to $75,000, which would help a significant portion of the population save more.

He also believes that pooled registered pension plans (PRPPs) are worth considering, but they shouldn’t be voluntary.

“Employers, if they don’t have a registered pension plan, would have to put in a PRPP, and it would be mandatory for employees to save,” Morneau said, adding that workers who want to opt out would be allowed to do so.

Voluntary savings programs aren’t doing their job, explained Michael Wolfson, the Canada Research Chair in population health modelling at the University of Ottawa.

“We have over half a century of very generous tax incentives for RRSPs, and it’s just not working,” he said, adding that 54% of all RRSP contributions were made by the top 10% of income earners. “What will work is CPP expansion.”

Join us on Twitter

While I didn’t attend the conference on Pension issues, it sounds like almost all agree that improvements to CPP will go a long way to protecting the future retirements of working Canadians.

All except the Canadian Federation of Independent Businesses who continually argue that improvements to CPP will hurt job growth etc.

It’s time for the CFIB to get onboard with those representing working Canadians, and those industry experts and research companies that see the need to improve retirements for all working Canadians. After all, the upside for businesses are many, not the least of which is having seniors who can afford to buy from those very businesses that continually say no to CPP improvements.

The real solutions to address the needs of many seniors who will face a retirement in poverty is mandatory improvements to CPP. RRSPs are not used by those working Canadians who can least afford to contribute. And unless all employers/employees make mandatory contributions to an improved CPP we will continues to see millions of working Canadians face a retirement in poverty.

Let’s hope that the federal government will be convinced by the provinces and those many experts who do not have a vested interest continuing with the old fixes that have failed working Canadians for many years. Let’s hope that the Feds do the right thing for those Canadians who are just entering the work force with little prospect of big RRSP/ PRPP accounts or good defined benefit plans.